This Week in State Tax

Maine recently implemented a new graduated tax rate for its real estate transfer tax (RETT) and controlling interest transfer tax (CITT) regimes. Historically, Maine RETT and CITT were imposed at a rate of $2.20 per $500, or fraction thereof, of the value of the property transferred. The new legislation (L.D. 210) adds an additional tax of $3.80 per $500, or fraction thereof, of the value of the property transferred to the extent it exceeds $1 million – effectively increasing the RETT and CITT rate to $6 per $500 on the value in excess of $1 million – effective November 1, 2025. The historical tax and additional tax are statutorily imposed on both the buyer and the seller (one-half each).

Additionally, Maine has enacted two new exemptions from RETT and CITT.  L.D. 210 contained an exemption for transfers to buyers receiving financial assistance through the Maine State Housing Authority first-time home-buyer mortgage loan program, effective November 1, 2025. L.D. 1768 enacted a new exemption from RETT and CITT, under certain conditions, for transfers of a mobile home park from the owner to a majority of the park residents who are residents of Maine or to a mobile home owners’ association organized in Maine. This change took effect September 24, 2025. For more information on these and other real estate transfer tax matters, please contact Michelle Dohra or Brian Koss.

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The New York City Department of Finance recently proposed rules to begin implementing the 2015 changes to the City Business Corporation Tax (BCT). In 2015, the City passed legislation to more closely align the BCT with the New York State Business Corporation Franchise Tax, including the adoption of changes such as market-based sourcing and economic nexus. In its recent release, the Department announced a public hearing to be held on two draft provisions covering definitional matters and the imposition of the BCT. In the announcement, the Department reiterated its intent to maintain general conformity with the New York State Business Corporation Franchise Tax regulations, while also balancing the interests of the City “to provide a distinct approach to areas where parity was not historically maintained … or where the BCT and NYS Corporate tax statutes diverge.” The Department will, in subsequent months, release additional draft BCT rules to reflect the 2015 law. The public hearing on the initial proposals is set for November 20, 2025, and the Department is accepting public comments on the two proposals until November 20, 2025. Notably, the draft on the imposition of the BCT contains an economic nexus provision as well as addressing the applicability of P.L. 86-272 to a business’s activities in the City which incorporates an “Internet Activities Rule” like the New York State regulation. Please contact Aaron Balken or Alec Schwartz with questions on the Business Corporation Tax and the Notice of Public Hearing. Please see also KPMG SALT Alert! 2025-13.

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The Tennessee Department of Revenue recently ruled that a taxpayer's mobile healthcare solution subscription is subject to sales and use tax as a sale of software. The taxpayer provides a service that enables users to monitor their heart health via a mobile app which tracks a user’s blood pressure, pulse, weight, and activity levels. Clients pay an annual subscription fee and, in turn, make the service available to their employees and their employees' dependents. The subscription includes access to the app and FDA-approved Bluetooth blood pressure monitors that function only with the subscription, as well as ongoing technical support and engagement materials in the form of emails, postcards, and videos.

Analyzing the totality of the facts and circumstances, the Department found that the primary purpose (i.e., true object) of the subscription is access to the health-tracking mobile app. Under Tennessee law, sales of prewritten computer software, including remotely accessed software, are taxable. When a transaction bundles taxable and nontaxable items for a single price, and the taxable item is the main purpose of the transaction, the entire price is subject to tax. Here, the Department found that the app’s software tracks participants' health metrics, generates reports, and provides wellness guidance. All these features are automated, and none are performed by medical professionals or other employees. In the Department’s view, the mobile app was the “objective that is being accomplished” in the taxpayer’s transactions with its customers. As such, the true object was the taxable sale of remotely accessed software.

The Department also found that the subscriptions were not exempt from taxation as information or data processing services. Data processing means the “converting of raw data to machine-readable form and its subsequent processing (such as storing, updating, rearranging, or printing out) by a computer.” In this case, the Department found that there was no raw data (absent the monitor and the app) to be converted into a readable form and subsequently processed by a computer.

Finally, The Department noted that the taxpayer’s subscription includes tangible personal property elements, including the Bluetooth blood pressure monitors, postcards, and posters. The Department found that the taxpayer was not the ultimate consumer or user of these materials, and therefore, the materials were included in the taxable sales price of the taxpayer’s subscription. Accordingly, the taxpayer may choose to use a resale certificate when purchasing the monitors and other materials included in the package. For more information on Tennessee Revenue Ruling 25-08, contact Justin Stringfield.

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Several states have recently taken action or provided guidance with respect to their conformity to the provisions of the One Big Beautiful Bill Act (OB3).

District of Columbia: D.C. City Council Chairman Phil Mendelson recently proposed a resolution, which was unanimously approved by the Council, to sever the District’s conformity to many of the provisions of OB3. Recall, D.C. law conforms to the provisions of the Internal Revenue Code (IRC) on a rolling basis, so any changes made to the IRC automatically become law in the District unless the Council acts to not conform. The Chairman introduced an emergency resolution to decouple from the OB3 provisions to avoid a negative revenue impact to the City, allow the Council more time to review which federal tax changes should be adopted, and give the Office of Tax and Revenue more time to develop forms and guidance on the tax changes in OB3. Following approval of the resolution, the Council also unanimously approved the “D.C. Income and Franchise Tax Conformity and Revision Emergency Amendment Act of 2025” (Bill B26-0457), which is a temporary 90-day measure under which the District would decouple from most OB3 provisions, including IRC § 168(k) (bonus depreciation), IRC § 168(n) (bonus depreciation for qualified production property), IRC § 174A (full expensing of domestic Research & Experimental expenditures), and the amendments to IRC § 163(j) (interest expense disallowance). From an individual tax perspective, D.C. would decouple from no tax on overtime or tip income, the increased standard deduction, and personal interest on car loans. Concurrently, the Council unanimously approved the “D.C. Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025” (Bill B26-0458), which would make changes in Bill B26-0457 permanent following approval by the D.C. Mayor and a subsequent review period by Congress. Both Bills, B26-0457 and B26-0458, are with Mayor Bowser for approval. Please contact David Meyer with questions on Council Chairman Mendelson’s Request, Bill B26-0457, or Bill B26-0458.

Iowa: The Iowa Department of Revenue has issued guidance on the interaction between the Iowa corporate code and certain OB3 changes. Recall, Iowa is a rolling conformity state and thus generally conforms to the changes under OB3. For tax years 2019 and after, however, Iowa modified its conformity to the IRC and enacted a law providing a subtraction modification for “global intangible low-taxed income” (GILTI) to the extent it was included in Iowa taxable income. OB3, effective January 1, 2026, changed the computation of GILTI and renamed the income as “Net CFC Tested Income” (NCTI). The new guidance from the Department indicates that because references to GILTI in the IRC were changed to NCTI, Iowa’s subtraction modification which specifically references “global intangible low-taxed income” will not extend to NCTI. Thus, to the extent that NCTI is included in federal taxable income, it will also be included in Iowa taxable income, absent any subsequent state law change. The guidance further indicates that Iowa will conform to the OB3 changes affecting Foreign-Derived Intangible Income (FDII), renamed as “Foreign-Derived Deduction Eligible Income” (FDDEI), because state law incorporates the deductions allowed under IRC section 250 which include both FDII and FDDEI. Finally, the departmental guidance notes that corporate taxpayers included on a consolidated federal return may be required to file separate Iowa returns or file an Iowa consolidated return that includes only those members that are subject to Iowa corporate income tax, which may require a re-computation of NCTI and FDDEI for Iowa purposes. Please contact Dale Busacker with questions on the Iowa Department of Revenue’s GILTI/NCTI and FDII/FDDEI Guidance.

Illinois: During its recent veto session, Illinois lawmakers passed Senate Bill 1911, which now awaits Governor Pritzker’s signature. The bill would decouple the state from IRC § 168(n) (bonus depreciation for qualified production property), while also updating state law language to conform with the OB3 provision replacing GILTI with NCTI. Recall, Illinois enacted a measure allowing a corporation to deduct only 50 percent of its GILTI (now NCTI). The new law also removes the sunset date on the state’s elective pass-through entity tax adopted previously to create a workaround for owners of certain pass-through entities to the federal state and local tax deduction limit; it was set to expire on January 1, 2026. Please contact Brad Wilhelmson with questions on the Amended Senate Bill 1911 and other matters in the Land of Lincoln.

Minnesota: Minnesota begins its state tax corporation tax calculations with the Internal Revenue Code, as amended through May 1, 2023, meaning it does not conform to the changes in OB3 under current law. The Minnesota Department of Revenue has published draft versions of their 2025 Corporate Franchise tax forms (not for filing), reflecting how OB3 changes affecting tax year 2025 will affect Minnesota corporate tax returns. Notably, the Department directs taxpayers to use Schedule M4NC (Federal Adjustments) to calculate nonconformity adjustments related to federal tax changes. Please contact Dale Busacker with questions on Minnesota’s 2025 Corporation Franchise Tax Forms and other corporate matters in the Gopher State.

Pending Updates: In other OB3 related news, Indiana Governor Mike Braun has signed a proclamation calling for a special legislative session to, among other things, address OB3. In Delaware, H.B. 255 is working its way through the General Assembly and includes a number of decoupling provisions related to OB3. We will continue to monitor these developments and provide updates in TWIST as they become available.

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